The Securities and Exchange Commission

The stock market crash of 1929 and the Great Depression that followed destroyed the public's faith in Wall Street, exposing a securities market riddled with fraud, manipulation, and insider dealing. As part of the New Deal, Congress created the Securities and Exchange Commission in 1934 to regulate the markets and restore the trust without which capitalism could not function. To lead it, President Roosevelt shrewdly chose the financier Joseph P. Kennedy, a man who knew every trick because he had used them.

The SEC's core principle was disclosure. Companies that sold stock to the public would have to tell the truth about their finances, and those who lied, manipulated prices, or traded on inside information could be prosecuted. By forcing transparency onto the markets, the commission aimed to give ordinary investors a fair chance and to make the exchanges something other than a rigged game for insiders.

The agency was tested by every financial upheaval that followed — the market crash of 1987, the accounting scandals of the early 2000s, the collapse of 2008, and the exposure of enormous frauds such as the Madoff scheme. Critics faulted it for missing warning signs and for being outmatched by the industry it policed, while defenders credited it with keeping American markets the deepest and most trusted in the world.

The Securities and Exchange Commission remains the chief referee of American finance, its rules shaping how companies raise money and how markets behave. Its creation marked a turning point — the moment the federal government took responsibility for the integrity of Wall Street — and its history is inseparable from the recurring struggle to prevent the next financial catastrophe.